3SOF

I don't want to highjack the AMEP thread. so here is a little info on NLG.TO:

I like small oil companies that recently have shifted from being mainly exploration companies to mainly production companies. Some times you can find amazing opportunities here.

Nelson Resources limited is such a company. NLG established its presence in the Kazakhstan oil sector in 2000. The company has accumulated significant losses as a result of acquisitions, research and development costs.

The Q1 2005 did however show that the company has now gone from being a start up to a profitable oil company.

They posted a 35.8 million profit and the revenue increased with 273% compared to Q4 2004. The revenue increase is a combination of a 148% increase in production and a 51% increase in oil prices.

In the latest production figures from May total production has increased with 14% from April but what is even more promising is that they expect to increase the production from one field (North Buzaki) with 300% during the rest of year.

I forecast a PE around 6 in 2005 and well below 4 in 2006 with today's oil prices and the expected production increases.

NLG seems to be a screaming buy with the proven growth and profitability.

You can read more here: http://www.nelsonresources.com/

I am not a great chart reader. But from my perspective it seems like it has a strong base at 2 (I have at least tried to buy below without success). It will form a nice cup with handle if it breaks out of the present trading range. There is also a clear divergence between the RSI and the stock price, which should indicate a pending increase. I would love comments from the experts!

it looks good but you should know that the cup w/handle as defined by its originator William Oneil needs a runnup before it goes into this continuation pattern.  Support @ 2 looks valid but only a close in the area of 2.15 - 2.25 with volume would make me excited as a technician.  Goodtrading. 

Thanks EliteG. We came a bit closer to 2.15 today - can't wait till we hit your mark! Any comments to the RSI divergence?

The two largest public traded oil companies in Kazakhstan is Petrokazakhstan (PKZ) and Nelson Ressources (NLG.TO). Both of them are grossly undervalued IMHO.

Petrokazakhstan received a buy out offer yesterday which according to Wall Street Journal could value the company to 50-70 per share. PKZ traded at 33 before the offer.

This could make NLG even more interesting:

• It draw the attention to the huge opportunities in Kazakhstan
• If Petrokazakhstan turn the offer down NLG could be next on the buyers list
• If Petrokazakhstan accepts the offer there will be a lot of money that need to be reinvested. As the PKZ investors knows Kazakhstan I would expect some of that money to flow towards NLG.

I very much like your thinking here on this one.  It may happen.  Will be watching closely.

About the RSI divergence.  That is definately bullish...and I like that it is subtle.  The trigger is still price and volume but its nice to have RSI on your side. 

i can't get NLG on my stock screener
i use ameritrade.
is it only on TSX ?

-rocket8

Having in mind that US is closed today I thought it might be an idea to talk about some Canadian oil stocks. I am sure you are all bored today      

We have discussed at lot about the coming oil bubble. I don't think it is a bubble but rather a fundamental change in supply and demand.

Recently a report titled "The mitigation of the peaking of world oil production" said: "World oil peaking represents a problem like none other. The political, economic, and social stakes are enormous. Prudent risk management demands urgent attention and early action." If you start a serious program today it will take 20 years before completion. A real tremble was felt from the Goldman Sachs alert, which predicts the price ceiling for a barrel of crude to reach $105. "We believe oil markets may have entered the early stages of what we have referred to as a super spike period," Goldman Sachs said. That's peak oil for you.

The chart below shows the discovery of oil and the consumption. It is clear to see that we are entering a period when demand will outstrip supply.

A report prepared by energy economists at the French investment bank Ixis-CIB has warned crude oil prices could touch $380 a barrel by 2015.

The report says that existing new oilfield projects would not be enough to satisfy unprecedented growth in demand from developing economies, particularly China. China will contribute greatly to the world's rising energy needs. "Rapid movements of people from the Chinese countryside into the cities would increase the demand for housing, cars and general transportation. All of this will fuel energy consumption," the report said.

I am not sure whether the oil will go to 80, 100 or 380 but I am pretty confident that the oil will go up and that this will unlock tremendous value for the smart investor. They question is how to play the market.

I have been concentrating on stocks that either have large undeveloped reserves or companies that are involved in drilling (you bet somebody will start to look for oil when the price is $100!)

The largest undeveloped reserves (which are not controlled 100% by state owned companies are in Russia and Kazakstan. That is why I love a stock like NLG.TO. They have 220 mn bbls oil reserve (2P) and their Market cap is 1.37 billion. Just at the existing oil price their proven reserves are worth 5.6 times the market cap. ($35 profit per bbls) then add the increase in oil prices, unproven reserves and new discoveries .......

On the drilling site of things my preferred pick is ESI.TO. There are expanding their international business rapidly through acquisitions and their north American business is pilling up cash!

We are close to break the resistance level at 2.10. If successful NLG can move much higher

Hi michael , thanks for the analysis. 
do u think it's now a good entry point? and do u think the fear of terrorism will bring down the oil sector a little bit?

Thanks!

Terrorism is more likely to increase than decrease the oil prices. The only way oil price will decrease due to terrorism is if people will change their energy consumption and history has learned us that this is very unlikely (will you start to walk to work because of the sad incidence in London today). However terrorism might be a threat to oil production. When that is said I think you should look at oil as a fundamental supply/demand story and not speculate in terrorism etc.

I am quite loaded with NLG.TO stocks and I obviously believe in the company. Their production increase and reserves are tremendous but you are asking if this is a good entry point and from a purely technical point of view you might consider to wait until 2.10 has been finally been brooken.

So 2.10 is behind us (hopefully!) This is my favourite oil play. I have looked around for the same kind of value without finding anything close to NLG.

Oil price around record levels, production sky rocketing, very high reserves, profitable. Nice combination!

good call michael! 

i am in at 2.13 , took quite a while to get my limit order filled.
thanks for the headsup. applaud!

Hello Michael, nice info again. i do feel this pick is in good hands! 
estimate 3.13 by year end, 78% gain, may not meet some momo plays criterian , but combined with the stability of its price i believe it becomes a very nice pick. just what i needed to stabilize my portfolio which has a few too many pennies. not to mention i dont need to convert my canadian dollars!
hoping the volume picks upand  it can go much higher!

good luck!

As with any good stock pick there are more to the story than what meet the eyes

ATON has a Can$ 3.75 (USD3.13) target on NLG.TO:

QuoteNelson Resources remains the top pick in our Caspian universe due to its very good operating results, which given the current high international oil price is likely to be appreciated by the market. Our end-2005 target price of $3.13 for Nelson provides more than 100% upside.

But can you trust these analysts? I guess the answer is sometimes but in this case we have quite solid proof.

We know the proven reserves, production increases and cost so it is relative easy to calculate the DCF. The only real variable is the oil price. Below is ATON's DCF calculation.

But that is not the whole story. We need to look into Kazakhstans Oil Barons and Chaparral as well.

Now that is a long story and I need to do some more research so I will post that later today! 

tWO OIL  cos looking good today: ENY and GGR - most are going up and down like roller-coasters!

Michael! i applaud u!
i admire ur expertise in FA!
it's a steady climber, experiencing enuf roller coaster for the pennies stocks already. 

good luck to all!